Online retailer Ocado lifted guidance on Tuesday, citing an improvement in the profitability of its warehouse technology business.
The news reassured investors and sent the British company’s shares up by 18%.
The group runs an online grocer in the UK through a joint venture with Marks & Spencer, as well as selling cutting-edge warehouse technology to retailers around the world.
Ocado’s shares have slumped 55% this year, with the market spooked by a slowdown in the rollout of robotic sites and modules for its retail partners.
But on Tuesday, shares jumped 18% to 402 pence in early deals on its upgrade to margin and cash flow guidance.
‘A Clear Plan’
Chief executive Tim Steiner told Reuters that investors had no reason to worry.
Steiner said, “I’m not concerned in investors losing confidence because they shouldn’t be losing confidence.
“We’ve got a clear plan and we’re executing to that clear plan.”
Citi analysts said the share price reaction was to be expected given the upgrades to technology and cash expectations, plus weakness in recent days.
Last month, Ocado said its Canadian supermarket partner Sobeys had paused the opening of a fourth robotic warehouse, or customer fulfilment centre (CFC), as Ocado calls them.
The company has also seen Kroger in the US slow down its rollout of sites, with some analysts thinking that Ocado will need to raise significant additional capital.
It now expects its key technology solutions division to achieve a ‘mid-teens’ earnings before interest, taxes, depreciation and amortisation (EBITDA) margin in the full 2023-24 year.
This is above previous guidance of over 10%.
Ocado also forecast underlying cashflow would improve by £150 million ahead of a previous expectation of £100 million.
It added that liquidity remains strong at £1.05 billion.
First-half underlying earnings, or adjusted EBITDA, Ocado’s preferred measure, was £71.2 million, up from £16.6 million.
Revenue rose 12.6% to £1.5 billion.
Read More: Ocado Builds On Aeon Partnership With Plans For Third Robotic Warehouse
